Actuarial Standards Board Update

By Jim Christie, FCIA

New ASB Chair

This is my last report on Actuarial Standards Board (ASB) activities to CIA members as my term as ASB Chair expires at the end of June. The Actuarial Standards Oversight Council has selected Ty Faulds to succeed me.

ASB Priorities

In addition to our regular ongoing work maintaining existing standards, the ASB has set the following topics as our next priority areas:

  1. Updating pension standards to specifically address target benefit plans;
  2. Creation of standards respecting pension investment returns;
  3. Evolving practice in the Own Risk Solvency Assessment / enterprise risk management field; and
  4. Consistency of standards between practice areas.

Updates of Current Activities

A designated group (DG) chaired by Bob Howard continues to work on an exposure draft (ED) on the use of models. The Practice Council is developing a companion educational note on what is or is not a model. While the DG has essentially completed the ED, the ASB would prefer to have a draft educational note released with the ED to minimize any misunderstanding and confusion among practitioners about the new standard. The ASB expects to approve issuing the ED shortly after its August meeting.

A DG chaired by Ed Gibson will be bringing an ED on social security to the June ASB meeting. This ED will incorporate the principles of International Standard of Actuarial Practice 2 (ISAP 2) – Financial Analysis of Social Security Programs into the Canadian Standards of Practice. It will propose creation of a new part 7000 in our standards as we do not specifically address social security.

ISAP 3 (Actuarial Work under International Actuarial Standard 19) was recently accepted by the International Actuarial Association (IAA). A DG chaired by Christiane Bourassa has begun to review ISAP 3 to determine how best to integrate it within our standards.

The International Accounting Standards Board is not expected to release a final version of International Financial Reporting Standard 4, or IFRS 4 (Insurance Contracts), until 2016, to be effective in 2019. In anticipation of the final version, the IAA has begun working on a related ISAP 4. A DG chaired by Simon Curtis is proactively monitoring the IAA’s progress on this ISAP. Ultimately this DG will recommend to the ASB what revisions to our standards are necessary to address ISAP 4. Given the short timeframe between the IAA adopting ISAP 4 and when Canadian actuaries will need standards for IFRS 4, the DG expects that ISAP 4 will be added as a new standalone section within our standards. The ASB reviewed a draft notice of intent (NOI) in April and expects to review a revised draft NOI next month.

A DG chaired by Josephine Marks has begun a quinquennial review of part 2000 (Insurance) of our standards. It will be presenting a draft NOI for the ASB to discuss at its June meeting.

At that meeting, the ASB expects to approve release of a final communication of a promulgation of the mortality table referenced in the Standards of Practice for Pension Plans (subsection 3530). The effective date of the promulgated table will be October1, 2015.

The ASB has approved release of an initial communication of a promulgation of the mortality table referenced in the Standards of Practice for Actuarial Evidence (subsection 4530), which was generally consistent with the pension promulgation with a May 18, 2015, comment deadline. The DG, chaired by Conrad Ferguson, will review comments on the initial communication and the ASB expects to approve a final communication in June. The effective date of the promulgated table is expected to be October1, 2015.

A DG chaired by Gavin Benjamin is focused on reviewing the assumptions underlying pension commuted values other than mortality. A second DG focused on assumptions underlying marriage breakdown capitalized costs is expected to start work later this year.

A DG chaired by Tony Williams has begun to address the calibration criteria of pension asset returns. Existing actuarial standards do not address the volatility associated with stochastic modelling of investment returns for pension funding. The DG will not be mandating a particular stochastic model for investment returns, but rather (as with life insurance) will prescribe calibration criteria for the outputs of any stochastic model used.

A DG chaired by Paul Della Penna continues work on the quinquennial review of the General section (part 1000) of our standards. It is opting to prepare a draft ED before presenting the NOI to the ASB. The DG is behind schedule and does not expect to have an NOI ready for ASB discussion until next month.

In April the ASB appointed a DG, chaired by Tony Williams, to review pension valuation disclosure standards as they relate to shared risk plans, target benefit plans, and stress testing.

Jim Christie, FCIA, is Chair of the ASB.

Canadian Institute of Actuaries/Institut canadien des actuaires